from Birch Gold Group:

One signal you don’t want to see in times of economic uncertainty is an increase in mortgage delinquencies.

If people aren’t paying the bill that puts a roof over their head, that doesn’t paint a pretty picture for the state of the U.S. economy.

Sadly, it looks like that picture could be taking shape right now. Wolf Richter recently highlighted the beginning of a potentially disastrous trend:

In April, the share of all mortgages that were past due, but less than 30 days, soared to 3.4% of all mortgages, the highest in the data going back to 1999. This was up from 0.7% in April last year. During the Housing Bust, this rate peaked in November 2008 at 2%.

The incredible jump in newly delinquent mortgages can be seen clearly in the chart below, by the owner of the famous Case Shiller Index, CoreLogic:

“The nation’s overall delinquency rate was 6.1% in April,” according to the CoreLogic site, which is the highest overall mortgage delinquency rate in over four years.

Even more startling is the fact that mortgages more than 30 days past due increased by a substantial amount for all ten of the largest metropolitan areas, with New York and Miami each logging more than a 10 percent increase:

But the problem is not confined to these ten metro areas alone. According to the same CoreLogic report, “Nearly every metro recorded an increase in the overall delinquency rate, with tourist destinations such as Kahului, Hawaii, Atlantic City, New Jersey and Las Vegas, Nevada all showing gains of over 5 percentage points in the overall delinquency rate.”

While the danger posed by the current mortgage delinquencies is fairly obvious, keep in mind the pandemic also spurred the passage of the CARES Act. Part of that legislation provides forbearance protections.

Writing for Yale’s School of Management, Vaasavi Unnava explained what this means:

Individuals with single-family mortgages may write to their mortgage servicer requesting forbearance for 180 days due to COVID-19-related difficulties. In such a case, no additional fees, penalties, or interest outside of normally scheduled terms may be levied on the borrower.

But eventually, even the protections offered under the CARES Act will end. And keep in mind this information is only reported through April.

When May, June, and July’s data is reported and the CARES Act is no longer helping, it will beg the question…

What Are Future Potential Ripple Effects for the Housing Market?

According to the Department of Labor, for the week ending July 11, total unemployment claims continuing to receive unemployment settled at 32 million. Once the CARES Act protections end, if those people are still unemployed or the situation gets worse, it would seem like delinquencies could rise even further.

Wolf Richter reported, “CoreLogic expects to see ‘a rise in delinquencies in the next 12-18 months – especially as forbearance periods under the CARES Act come to a close.’”

This could happen especially if the jobs some people left aren’t there once they can go back to work.

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